Advertisement

'The right strategic poker move': Here's what Wall Street is saying about Tesla's 4th-quarter earnings report

Elon Musk making a grimace and pointing a finger.
Elon Musk.Frederic Brown/Getty Images
  • Tesla stock surged 12% on Thursday after the EV maker reported fourth-quarter earnings.

  • Wall Street was mixed on the results as some are worried about a decline in profits due to its recent price cuts.

  • Here's what Wall Street analysts had to say about Tesla's earnings report and 2023 outlook.

Tesla surged as much as 12% on Thursday after its fourth-quarter report beat analysts' estimates and included a positive outlook for 2023.

The stock had suffered in recent weeks as investors worry about the impact recent vehicle price cuts will have on Tesla's profit margins. But CEO Elon Musk said it is experiencing the strongest demand in its history after the price cuts were implemented.

Here were the key numbers:

Revenue: $24.3 billion, versus estimates of $24.2 billion
Adjusted earnings per share: $1.19, versus estimates of $1.13
Automotive gross margin: 25.9%, versus 27.9% in the prior quarter

"It was a fantastic year for Tesla. It was our best year ever on every level... we delivered over 1.3 million cars and achieved a 17% operating margin... while doing so, we generated $12.5 billion in net income and $7.5 billion in free-cash-flow," Musk said on the earnings call.

Additionally, he said Tesla is targeting 1.8 million vehicle deliveries in 2023, and that the potential to hit a stretch goal of 2 million is possible if everything goes smoothly. "We're not committing to that, but I'm just saying that's the potential."

Here's what Wall Street is saying about Tesla's fourth-quarter earnings report.

Goldman Sachs: 'Strong orders at lower prices'

"Tesla commented that since it lowered prices it has seen the strongest orders year-to-date in its history, with orders running about 2X production. While we believe this rate of orders may not be sustained in light of the weak macroeconomic environment, it would suggest the company is tracking well to our 1.8 mn delivery estimate," Goldman Sachs analyst Mark Delaney said.

"However, an incremental negative in our opinion was on cost per vehicle which impacted the 4Q22 gross margin, and costs are tracking higher than we had previously expected for 2023 (Tesla cited lithium and in turn battery costs as one key yoy cost headwind for 2023)."

Goldman Sachs rates Tesla at "Buy" with a $200 price target.

Wedbush: 'The right strategic poker move'

"Musk & Co. delivered in epic fashion with demand that is currently 2x production coming out of the gates in 2023 and laying out a 1.8 million delivery bogey for the year which was exactly what the bulls wanted to hear and the bears (for now) will go back into hibernation mode," Wedbush analyst Dan Ives said.

"While in the near-term Tesla is sacrificing margins for higher volumes, we view this as the right strategic poker move to put an iron fence around its customer base and fend off growing EV competition coming from Detroit, Europe, and China."

Wedbush rates Tesla at "Outperform" and raised its price target to $200 from $175.

JPMorgan: 'Margin disappoints even prior to impact of large price cuts'

"Note the softer trend and below-consensus adjusted automotive gross margin comes before the impact of large price reductions that will primarily be felt beginning in 1Q23; as such, we view margin trajectory negatively and expect that consensus margin expectations are likely to decline closer toward our forecasts (we forecast 21.7% in 2023, down from 26.7% in 2022)," JPMorgan analyst Ryan Brinkman said.

"Headed into 3Q22 earnings, company-compiled consensus for 2023 deliveries was 1,949K (+43% y/y)—now, the company is guiding to 2023 deliveries of 1.8 mn (+37% y/y), which is -8% lower than analysts expected just several months ago despite prices being on average -10% lower. This to us suggests the potential for a round of negative earnings revisions."

JPMorgan rates Tesla at "Underweight" with a $120 price target.

Read the original article on Business Insider